Fannie Mae-No Politics (FNMA)

[kthomp19]

Politics may end up being more important than the 'Capital Stack':

This just plain isn't correct. The capital stack was respected, not violated, when the AT1 bonds were written down.

This excellent article by John Hempton explains it. The key line:

So there it is. And I have to repeat the prospectus: “The Write-down may occur even if … ordinary shares of CSG remain outstanding”.

Yep. It is there in plain English. You own these and you rank behind common stock!

People complaining about how CS common shareholders got some money while the AT1 bondholders got wiped out were mostly just having an ill-informed knee-jerk reaction to a bad headline.

And if you have a problem with CS's presentation that supposedly said AT1 bonds would be whole if the commons got anything, blame others' misinterpretations of it. From that article:

Oh - and Credit Suisse did not hide it. You can find a fixed income presentation still on the website here:

This fixed income presentation gives an order of creditors - with deposits being the most protected - and stuff at the bottom being the least protected.

It is absolutely clear. Low-trigger AT1s are further down the capital stack than equity capital. They clearly ranked below equity capital.

If you invested in AT1s thinking they were an ordinary preference share you were wrong. And you were wrong because you did not read the documents. The documents were readily available and spelled out the order of creditors in plain English.